13 frequently forgotten facts about board appointments

Julie works with boards and directors to improve the effectiveness of their governance and performance of their company.
  1. There is no automatic right for a shareholder of any size to have a nominee on the board.
  2. No director is legally able to act in the interests of anyone other than the company itself (duty is to the company as a separate legal entity).
  3. The board must develop effective annual selection, induction, evaluation, development and renewal processes to keep itself healthy and sufficiently diverse (from Professor Bob Garrett).
  4. Directors can appoint to a casual vacancy if the board is not already at its maximum number.
  5. A director who is appointed to a casual vacancy can serve on the board (and be remunerated) until the next general meeting; at the next GM the shareholders will vote the director onto the board.
  6. If the shareholders do not vote a nominated director onto the board the board is ill-advised to reappoint them to casual vacancies and try again next year; the shareholders’ vote at the GM should be considered the final say on the matter.
  7. A shareholder may nominate a director to the board (or its nomination committee) and ask that the nomination be put to a GM for vote.
  8. A board cannot oblige shareholders to vote for the boards recommended candidates.
  9. Bond holders and other creditors do not have a vote in director elections.
  10. Directors are elected for a set term (often three years) and, at the end of their term must stand for re-election if they wish to remain on the board. Some boards have a maximum number of consecutive terms.
  11. Once elected, a director is very hard to remove. There is no right for a board to remove a director; the shareholders in a GM can vote on a removal resolution. Putting removal resolutions to meetings is rare and embarrassing for all concerned.
  12. Directors’ remuneration is capped to an aggregate amount which is approved by the shareholders at a general meeting. This amount may not be exceeded even if additional directors are appointed during the time between shareholder meetings.
  13. Nominee directors are not considered to be independent. The ASX Governance Principles, and other codes around the world, hold that a majority of the board should be independent.
  1. It is foolish to appoint any director who refuses to sign an undertaking to be bound by the code of conduct and major governance policies.
  2. It is dangerous to assume that someone knows how to be a director just because they know how to be an expert at whatever their career has been thus far.
Could Julie help your board to be a powerful force driving your company’s success?

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